On TAP: Kuttner + Meyerson

This past Monday, the California Supreme Court rocked the world of actual existing American capitalism by unanimously ruling that workers who are labeled “independent contractors” actually have to be independent and contractors—not mislabeled employees. In a suit brought by truckers for a delivery company who had formerly been that company’s employees until that company re-labeled them, the Court ruled that such mislabeling was illegal in the nation’s largest state.

The full implications of the ruling remain unclear, but it likely affects the tens of thousands of drivers who deliver goods from the ports of Los Angeles and Long Beach to the warehouses of companies like Walmart, the tens of thousands of drivers for companies like Uber and Lyft, and the tens of thousands of construction workers employed on long-term construction projects. If the company sets the workers’ wage rates and restricts them to working just for them, the Court ruled, then those workers are employees, no matter what their employers call them. California’s stellar labor commissioner, Jerry Brown-appointee Julie Su, has been leveling back-pay settlements on a host of misclassifying employers for much of the past decade, but until now, she’s been constrained to do so only when the individual worker has brought suit. The Court’s decision might enable the state to render judgments on a broader basis.

It’s interesting to note that among the justices who ruled in favor of the drivers were a number of Arnold Schwarzenegger appointees to the Court, including Chief Justice Tani Cantil-Sakauye, who authored the decision. In hindsight, Schwarzenegger increasingly looks like the nation’s last moderate Republican elected official, a distinction he achieved by having been elected without having to go through a Republican primary (he won the governorship in the election, open to all voters, that recalled Gray Davis). Like earlier moderate Republicans—President Eisenhower, for instance, who appointed both Earl Warren and William Brennan to the U.S. Supreme Court—Schwarzenegger appointed justices who’ve taken notice of the lives of real people, which is certainly what they did in their emancipatory ruling earlier this week.

Robert Rubin, Philosophe. If you have ingested some bad seafood and are looking for a quick emetic, you cannot do better than Robert Rubin’s April 30 op-ed piece in the Times, in which Rubin explains how the study of philosophy under Professor Raphael Demos prepared him for a successful career in finance and then in government. Isn’t that nice?

This little essay is a classic case of image-polishing masquerading as deep reflection, by a man who personified the revolving door between Wall Street and Washington. Rubin, first as chief economic adviser and then as treasury secretary, persuaded Bill Clinton to preside over an orgy of deregulation that enabled Citigroup to become a financial conglomerate, with Rubin becoming a senior executive only a few months after leaving government; and then the same deregulation crashed the economy in 2008.

Rubin also persuaded Clinton to embrace budget balance as a fiscal holy grail, a politically and economically disastrous idea that extended into the Obama administration, when several of Rubin’s close protégés held senior positions. And he convinced Clinton to let China into the WTO with few changes to China’s predatory behavior other than giving firms like Goldman Sachs (from whence Rubin came) a piece of the action.

Rubin does not address any of this, much less try to defend it. Rather, we get an affectionate self-description of his life as a Harvard undergraduate, discovering the appeal of philosophy. He writes:

I’m asked from time to time which undergraduate courses best prepared me for working at Goldman Sachs and in the government. People assume I’ll list courses in economics or finance, but I always answer that the key was Professor Demos’s philosophy course and the conversations about existentialism in coffee shops around campus. For me, embracing these two perspectives brought me a sense of calm in what were incredibly stressful situations.

Unfortunately, tens of millions of people who suffered from the economic collapse and the recession that followed did not get to enrich themselves the way Rubin did by surfing conflicts of interest between Wall Street and Washington, much less to find serenity in coffee houses or philosophy classes at Harvard. They did not find serenity at all; they were struggling to survive and millions lost their homes.

If you want a deeper explanation for the sort of nominal Democrat who brought America Donald Trump, you need look no further than Robert Rubin.

One of the aphorisms of Greek philosophy that Rubin must have missed is this one: “know thyself.” The self that Rubin knows is entirely benign, self-satisfied, feigning reflection and wisdom. History may judge him more harshly.

Angela Merkel has come and gone, her visit to the White House late last week a veritable blip between the rapturous welcome given Emmanuel Macron and the uneasy chortles accorded Michelle Wolf. President Trump seems somewhat confounded by the challenge that Merkel’s Germany presents: an ally, but also a nag insisting that the U.S. adhere to the Iran agreement (as did Macron’s France, but Macron talks Trump’s language, as they share a common ideology: narcissism). A nation with which we run a trade deficit, but we can’t ask them to revalue their currency, since they use the euro. A major manufacturer of high-end steel, though little of it ends up here, and even if it did, it doesn’t undercut the U.S. steel industry, as its workers’ pay ranges from comparable to higher than ours’, and the same is true for the price of its steel.

So Trump has postponed unveiling his list of nations against whose steel he’ll impose tariffs. The grand Trumpian gesture would be to include everybody, but by firing that blunderbuss, he’d penalize both the trade-law miscreants and the trade-law compliers (not that distinctions such as these have deterred Trump up to now). The United Steelworkers have made clear that the point of the tariffs shouldn’t be to penalize producers like Canada, which don’t undercut U.S. steelmakers, but those nations that provide state subsidies to their producers so they can underprice us.

If Trump (for that matter, if the American economic establishment) wished to ferret out the real culprits behind our massive trade deficit, they’d look first and foremost to Wall Street. It was the rising power of American finance and its shareholder-über-alles ideology that propelled our manufacturing sector to move offshore in search of cheaper labor and higher profits. There are many reasons why Germany has retained its manufacturing sector while we have not, but chief among them is the fact that Germany has no equivalent of Wall Street or London’s “the City.” But for Deutsche Bank, Germany lacks a global investment titan, and its far stronger community-banking sector is committed, by virtue of its control by local stakeholders rather than distant shareholders, to bolstering domestic manufacturing. Germany has problems of its own, but a financial sector committed to undermining the nation’s economy isn’t one of them. It’s only one of ours.

2018: The Case for Optimism. So let’s review the bidding. The investigative waters keep rising around Trump. The bill guaranteeing the safety of the special counsel won’t pass, but the support of four senior Republicans on the Senate Judiciary Committee sends Trump a warning—seven if Trump were to stage a Saturday Night Massacre. Too much information is now with the U.S. attorney in New York. And firing Mueller would lead directly to impeachment.

Issues that looked like winners for Trump are turning blurry at best. China is pushing back against Trump’s hard line, and efforts by even hawkish trade officials to get back on the same side with the EU (whose support we need against China) are running up against Trump’s stupidly uninformed cold shoulder to Germany and his insistence that tariffs apply to Europe. Korea, despite early euphoria, will be far from an easy win for Trump, since at best we are in for a period of protracted diplomacy and a deal is still a long shot.

Republicans continue to look worse and worse for the November midterms. Speaker Paul Ryan’s unforced error in firing the House chaplain alienates Catholic Republican voters and divides his own caucus. The pitiful mess with former White House physician and failed VA nominee Ronny Jackson creates yet another wedge between Trump and his party’s nervous supporters in Congress. Trump's personal unpopularity spills over onto his Republican enablers.

And despite the Republican penchant for trying to rig or steal elections, please note that the six special elections for vacant House seats since Trump's election went off more or less as normal.

A Democratic pickup of at least 50 seats in the House seems likely, and the Senate is now seriously in play as well. In Tennessee, polls show the popular Democrat, Phil Bredesen, leading the widely detested far-right Republican and likely nominee, Marsha Blackburn. Even Republican Bob Corker, who is retiring from the Senate seat, backs Bredesen.

Lots could happen between now and November, of course, but none of it is likely to be good for Trump and the GOP. Even a good economy is not translating into support for the incumbent party.

I know, I know, it’s risky to count chickens before they hatch. But with all the gloomy news, there are actually many things to celebrate—things that keep hope alive.

Courting the Next Financial Collapse. You’d almost think the Republicans want the banks to melt down again. Bit by bit, they’ve been gutting the Dodd-Frank Act. The Consumer Financial Protection Bureau has been put on ice, placed in the hands of one of its sworn enemies, OMB Director Mick Mulvaney.

Giving banks free rein to screw consumers is one thing. Letting banks play roulette with the entire economy is something else. But the latest bad idea from the Comptroller of the Currency, the agency that regulates national banks, and the Federal Reserve, goes at the heart of the abuses that Dodd-Frank sought to remedy.

At the core of the financial crisis of 2008 was the tendency of banks to make increasingly risky bets, where the potential loss far exceeded their own capital. If all the bets went bad, all the banks would be insolvent. That’s what happened in the fall of 2008, and it took a massive government bailout to keep the banking collapse from taking down the rest of the economy.

Now the Fed and the Comptroller want to allow banks to have larger multiples of debt to capital. One of the core reforms of Dodd-Frank was to limit excess bank leverage. It’s not as if these strictures are draconian—banks today need to keep only six cents capital for every 94 cents they lend out.

But the bankers have lobbied the administration for even more generous rules, and the administration seems inclined to do their bidding. Like the tax cut, these policy changes have nothing to do with making the economy more efficient. They are entirely about rewarding the already rich, and increasing risks for the rest of us.

This proposal is so perverse that two Republican regulatory officials, one former head of the FDIC and the current vice chairman wrote an op-ed piece that The Wall Street Journal published warning against it.

Tom Hoenig and Sheila Bair wrote: "These proposals would weaken system resiliency either to benefit shareholder distributions or to allow the eight largest banks to become even bigger by taking on more leverage and more risk."

You get the sense that the Trump crowd knows their days are numbered—and want to deliver everything that’s not nailed down to their corporate allies before they are tossed out.

The destruction of family values—and families—by the Trump administration continues apace. A few days ago, The New York Timesran a storydocumenting that Trump’s Immigration and Customs Enforcement agency (ICE) has separated 700 children from their parents when they surrender themselves to seek asylum or are apprehended by ICE. The children—100 of whom are under the age of four—are sent to facilities often across the country from their parents, with whom they may be allowed sporadic phone contacts every few weeks or months. The Times documented the story of one 18-month old separated from his mother.

The Department of Health and Human Services (HHS) has confirmed that the number of children sent to shelters apart from their parent or parents is indeed 700. Perhaps HHS can produce a study of how such practices promote the health of children, while ICE can deliver a report on how the 100 children under four pose a threat to national security.

Yesterday, in a demonstration of what’s recently been termed “intersectionality,” but more fundamentally demonstrates simple humanity, Planned Parenthood condemned the practice for all the reasons it should be condemned. “ICE’s decision to remove protections for parents and their children is a stunning example of the Trump-Pence administration’s hypocrisy when it comes to its so-called ‘family values,’” Planned Parenthood Executive Vice-President Dawn Laguens said in a statement the organization released. “It is clear that rolling back these common sense protections for children and their families will only lead to more families being torn apart. … It is unconscionable that children as young as under four years old will be robbed of the opportunity to grow up with their parents and potentially without any plan for their own care in place.”

To its critics, Planned Parenthood presents a threat to the sanctity of the family and the parent-child relationship. In fact, Planned Parenthood at its very essence seeks to create healthy families where all children are wanted and loved, and its statement yesterday makes even clearer who in America actually upholds family values and who mocks and destroys them.

More Evidence of That Blue Wave. All the signs suggest that the wave is still building. In yesterday’s special election for an Arizona seat in in the U.S. House, the Republican candidate Debbie Lesko beat the Democrat, Hiral Tipirneni, by just six points, 53 to 47. This was in a staunchly Republican districtthat Trump carried by 21 points in 2016.

If the same 15-point swing to the Democrats were to occur this November, the Democrats would enjoy a House majority of between 20 and 40 seats.

What Trump disparages as the deep state, otherwise known as American democracy, seems to be holding. Republicans can gerrymander, they can use the entire arsenal of voter suppression tactics, but unless they literally cancel the election, those moves only give them an extra House 20 seats or so. In a true wave election, high Democratic turnout overcomes those obstacles.

This also looks to be a good year for the Democrats in state legislative and gubernatorial races, where large numbers of resistance candidates recruited by Indivisible and other grassroots groups are gaining momentum. The states are every bit as important as Congress.

It’s also the case that in a wave election, extreme gerrymandering can backfire. In a state like Ohio or North Carolina, where Republican legislatures took pains to spread out Republican voters into the maximum number of seats, they may have spread those voters too thin; and many seats presumed to be Republican in a normal election will flip in a wave election.

The large swing in races like the recent special elections in Arizona and Pennsylvania suggest that hard-core Trump voters are standing by their man, but a lot of swing voters are moving to the Democrats; and that the disgust with Trump rubs off on Republican candidates for Congress who are his apologists and enablers.

A few days ago, TheWashington Post ran an article detailing the curtailment of abortion rights in states since the 2010 elections, when many states fell under right-wing Republican control. Thirty-three states have enacted abortion restrictions since then, while just 17, plus the District of Columbia, have not.

What interested me about those two lists was the degree to which they didn’t alignwith the share of Roman Catholics in the states. The eight most heavily Catholic states—in order, Rhode Island (42 percent Catholic), Massachusetts (34 percent), New Jersey (34 percent), New Mexico (34 percent), Connecticut (33 percent), New York (31 percent), California (28 percent) and Illinois (28 percent)—were among the 17 that had not passed legislation curtailing abortion rights. Conversely, the 13 states with the lowest percentage of Catholics—in order, Mississippi (4 percent), Utah (5 percent), West Virginia (6 percent), Tennessee (6 percent), Alabama (7 percent), North Carolina (9 percent), Georgia (9 percent), South Carolina (10 percent), Kentucky (10 percent), Idaho (10 percent) and Virginia (12 percent)—were among the 33 states that have curtailed access to abortions since 2010.

In sum, the relationship between the number of Catholics in a state and the intensity of the state’s anti-abortion policies is completely inverse.

Now, there are a host of other variables at play here, too. The share of secular residents in those heavily Catholic states doubtless exceeds their share in the least Catholic states; the same surely goes for feminists. But what these lists confirm, to the surprise of no one who’s been following the politics of abortion over recent decades, is that the anti-abortion cause has political heft not in places where Catholics live, but in states that are home to evangelical Protestants. The promptings of Catholic clerics in the John Paul and Benedict mode notwithstanding, the culture-war politics of their parishioners are nowhere near so fierce and misogynistic—or at least, as politically effective—as those of the evangelicals. And, of course, many of their parishioners are engaged in the culture wars (if they’re engaged at all) on other side—in this case, the pro-choice side—of the barricades.

Make America Great Again—Progressive Variant. So let’s take Trump at his word and make America great again. A good place to start would be by repealing the $1.5 trillion in tax cuts for the rich and investing that money in America. Like in a serious infrastructure program.

That would provide tangible benefits that would help real people. It would create lots of good jobs, modernize public systems that have been under-funded for decades. And it would be a pretty good down payment on a green transition.

An Invest in America program would produce real investment, 100 cents on the dollar, as opposed to tax cuts that go into corporate stock buybacks and don’t add a penny to investment. And it would demonstrate that true public investment is often more efficient than private.

Topping up that $1.5 trillion with infrastructure bonds would help, too. If the Federal Reserve can buy over $3 trillion in sketchy financial paper to bail out underwater banks, maybe even the Fed can invest in America.

A progressive Invest in America program is also the right answer to panic about robots and artificial intelligence taking away human jobs. These automation scares come along every generation or so. In 1940, when the unemployment rate seemed stuck around 14 percent, many economists of that era believed that it just couldn’t go any lower—all those machines.

Then came World War II, with its massive public investment, and unemployment melted to under 2 percent. We need a World War II-scale build up—without the war. Let’s make America great again. How about it, Dems?

How Impeachment Will Whipsaw the GOP. As noted in a previous post, some too-clever Democratic strategists don’t want to talk about impeachment for fear of animating the Trump base to turn out and vote this November. But there are not enough hard-core Trumpers to keep the House in Republican hands.

Once Dems take back the House, impeachment inevitably becomes the first order of business. For several months—if Trump is still in the White House by next January—more of the lurid details of his corruption and opportunism will be spread across the public record as the Democratic House uses its full investigative powers. And the House is very likely to vote for impeachment.

This would then put Republican senators in an exquisite bind, heading into a presidential year: Back Trump to the end, alienate swing voters, and go down with the ship? Or vote to convict and infuriate the hard-core Trump base? Meanwhile, criminal prosecutions for Trump’s close associates and family are coming down the pike.

One way or another, Trump is likely to be gone by the 2020 presidential election. One possibility is that Trump, ever the deal-maker, cuts a grand deal with the impeachers and the prosecutors: He resigns the presidency, in exchange for no prosecutions. That way, he saves his skin and his brand. That deal could also look better and better to Senate Republicans, who don’t share their House counterparts' enthusiasm for Trump.

There is no parallel to the disgrace of the current Republican Party in putting opportunistic ideological and legislative gains ahead of the Republic. The legislative orgy will be over after this November, and Republicans will be looking to their own futures in the face of more and more hard evidence of Trump’s thuggery and a rising Blue Tide.